Euro 2012: Poland and the Ukraine Draw in 'Soccernomics' Clash of Co-Hosts

UEFA president Platini gestures towards a mascot as he meets Poland's President Komorowski before the start of the Euro 2012 soccer tournament in Warsaw

The Ukraine is set to collect the short-term economic, if not the footballing, rewards from the UEFA Euro 2012 championships, which kicks-off today, according to research from Societe Generale.

However, in the long run, Poland may benefit from an increase in future tourism as its image gains from the so-called "Barcelona effect" of the biggest-ever sporting event in Eastern Europe.

A huge increase in infrastructure spending in both Poland and co-host Ukraine will have a positive impact on economic growth and consumer sentiment, but well-heeled supporters from Germany, England and the Netherlands are likely to provide more of a boost to the former Soviet republic by the time Europe's footballing champion is crowned in Kiev on 1 July.

Poland has been using the tournament to justify important investments in infrastructure and tourist accommodation since being selected as co-hosts by UEFA in 2007.

Societe Generale economists Vladimir Tsibanov and Jaroslaw Janecki argue in their report, "Short-Term Soccernomics Effects", that the 110bn Polish zloty (£20.6bn) spent has added around 1.5 percent to GDP growth. Perhaps more importantly, the lion's share of the spending has been focused on lasting road improvements and new road construction.

Poland's government had also been expecting a significant boom in tourism as a result of the jamboree, with an original estimate of 820,000 visitors during the month-long tournament spending as much as 900m zloty. That prediction helped lead to the construction of 1,300 "branded" hotel rooms over the past three years.

However, SocGen's team believe the luck of the UEFA draw - which has Poland hosting Greece, Ireland Italy and Spain in the Group Stages - means visitor numbers and total tourist spending may be sharply lower.

"Polish authorities believe the 2012 European Football Championship will be a Polish version of the 'Barcelona effect', writes SocGen. "The investment before the 1992 Summer Olympics was crucial for tourism in Barcelona. In our view, it will be very difficult to replicate the Spanish success. Therefore, the promotional effect may become more visible in the number of foreign tourists in the coming years."

It's a game of two halves, of course, on in this case two hosts. The Ukraine will welcome well-heeled fans from Germany, England and the Netherlands during the Group Stage, and officials expect as many as 1.2m visitors staying up to four nights in the country and spending as much as $1,000 each. SocGen notes, however, that 700,000 tickets for matches in the Ukraine were purchased domestically, therefore it expects net foreign spending of only $500,000.

Infrastructure improvements cost the nation more than 107bn Hryvna (£8.6bn) but nearly 80 percent of that was dedicated to specific transport projects, including a Hyundai high-speed rail network among the host cities of Kiev, Lviv, Kharkiv and Donetsk.

Given that more than half of the spending was financed at the public level, tourist dollars will go some way towards repairing state coffers and steady a balance-of-payments gap that has had many analysts - including SocGen - predict will inevitably result in a devaluation of the hryvna. If tourist spending is up to the task, that devaluation could be postponed.

Inflation is likely to accelerate in both hosts as a result of the increase in spending and investment, says SocGen, particularly in the pricing of food, restaurants, and alcohol and tobacco.

Collectively, those elements comprise around two-thirds of the basket of goods the Ukraine uses to gauge consumer price inflation, nearly twice as much as in Poland, and thus the short-term impact will be more pronounced.

"In the medium term, we expect only a modest promotional effect from the championship," said SocGen. "The threat of a boycott of the matches being played in Ukraine by European leaders, in order to protest against the treatment of former PM Yulia Tymoshenko, could weaken the positive perception of the country."